On January 1, 20X4, Kangaroo Inc. (KI) entered into a lease agreement contract that entitled it to use equipment. Details of the contract follow:

Lease payment, including maintenance agreement

$85,000

Maintenance agreement included in lease payment

$3,000

Implicit rate in the lease (not known)

4%

Incremental borrowing rate

5%

Lease term

6 years

Economic life of equipment

7 years

Guaranteed residual value

$20,000

Expected pay-out on residual value guarantee

$6,000

Option to purchase

No

First annual payment due

Commencement date

KI's year-end is December 31. KI elects to adopt the practical expedient available to it andnot toseparately report the lease and non-lease components in the contract. What is the amount that it will record fordepreciation of this right-of-use assetfor its year-ended December 31, 20X4?

a.$73,582

b.$65,355

c.$77,988

d.$76,247